Investment Opportunities and Economic Outcomes: Who Benefits From College and the Stock Market?

Kartik Athreya, Felicia Ionescu, Ivan Vidangos and Urvi Neelakantan
Additional contact information
Felicia Ionescu: Federal Reserve Board
Ivan Vidangos: Federal Reserve Board

No 1151, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: Does the power of college to increase well-being exceed that of stocks, as subsidies to the former suggest? Perhaps not: we show that access to college increases well-being, but only for those whose preparedness and ability poise them for success. For some others, access to college affects well-being and mobility negligibly. This suggests that investments whose returns do not depend on individual characteristics may be more effective in improving the well-being of some individuals. The stock market, which offers comparably high returns, is a natural alternative. We find that a non-trivial fraction of high-school graduates would prefer a stock-index retirement fund to the subsidy currently flowing to college.

Date: 2018
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